THE HONG KONG INSTITUTE OF SURVEYORS

JUNIOR ORGANIZATION PQSL SEMINAR

BASICS of
COST PLANNING
&
COST ESTIMATE

By Victor Lau
B.Sc., M.Sc., MHKIS, MRICS
28 February 2006
 COST PLANNING & COST ESTIMATE

DEFINITIONS, TERMS & PROCESSES

TYPES OF PRE-CONTRACT COST PLANNING
FACTORS AFFECTING COST
ESTIMATES/PLAN

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DEFINITIONS, TERMS & PROCESSES

A. Classification of Areas
B. Terms of Cost Estimate & Cost Plan
C. Pre-Contract Cost Planning Processes

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DEFINITIONS, TERMS & PROCESSES
A. CLASSIFICATION OF AREAS

GROSS FLOOR AREA (GFA)

GFA is the area contained within the external walls of the building measured
at each floor level (including any floor below the level of the ground),
together with the area of balconies and the thickness of external walls (for
submission to Planning Authorities)
Note : Carpark & plant room areas are usually excluded, but this is NOT a
fixed rule

CONSTRUCTION FLOOR AREA (CFA)

CFA is the covered areas fulfilling the functional requirements of the building
measured to the outside face of the external walls or external parameter.
Areas occupied by partitions, columns, internal structural walls, bay windows,
stairwells, lift shafts, plant rooms, water tanks, carparks, open covered areas
and the like are included.

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DEFINITIONS, TERMS & PROCESSES
B. TERMS OF COST ESTIMATE & COST PLAN
ELEMENTAL QUANTITY No. of door
Area of wall finishes
Volume of concrete structure

ELEMENTAL RATIO Elemental quantity per CFA

(i.e. Element Quantity / CFA)

ELEMENTAL UNIT RATE Average cost per unit elemental quantity

(i.e. Total Cost of Element / Elemental Quantity)

INDICES Indication of price level for particular subject

tender price index
building services tender price index
labour index
material index
consolidated labour & material index
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DEFINITIONS, TERMS & PROCESSES
C. PRE-CONTRACT COST PLANNING PROCESSES
Stages Main Purposes
Inception & Prepare feasibility studies to
Feasibility determine cost limit / budget
Outline Proposal Prepare cost estimate & initial
cost studies in order to confirm
cost limit / budget
Scheme Design Prepare cost plan & detailed
cost studies in order to confirm
cost limit / budget
Design Update cost plan & further
Development cost studies of alternative
designs
Tender Cost check of final design
Available Information Type of Cost Planning
Site location & area; Preliminary Cost
Project details (e.g. type, plot ratio, Estimate
CFA, height limit)
Note : No drawings
Sketch design (e.g. general layout, Elemental Cost
building shape, no. of storey) Estimate
Plans, elevations & sections; Cost Plan
Framing plans;
Foundation information;
Finishes level;
Building services requirement
Alternative design proposal Revised Cost Plan
Complete design Pre-Tender Cost
(i.e. tender / working drawings & Estimate
specifications)
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TYPES OF PRE-CONTRACT COST PLANNING

A. Preliminary Cost Estimate

B. Elemental Cost Estimate
C. Cost Plan
D. Pre-Tender Cost Estimate
E. Reconciliation of Cost Plan

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TYPES OF PRE-CONTRACT COST PLANNING
A. PRELIMINARY COST ESTIMATE
Total Construction Costs = Construction Floor Area (CFA)
x
Unit Rate ($/CFA)
CFA
Land & development conditions
(e.g. site area, plot ratio, site coverage, height limitation & GFA)
Maximum buildable area = site area x approved plot ratio
Approx. CFA = site coverage area x no. of floor (for building with full site
coverage)
Approx. CFA = GFA x conversion factor (1.05-1.10 for residential, 1.10-
1.20 for office)
Unit Rate
Location factors
Specification level
Construction methods
Cost analysis of previous similar projects
Adjustment of price index
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TYPES OF PRE-CONTRACT COST PLANNING
A. PRELIMINARY COST ESTIMATE

Total Construction Costs = Functional Area

x
Functional Rate

Functional parameters
Hospital = 60m2 to 120m2 per bed x $A/bed
Hotel = 55m2 to 100m2 per room x $B/room
Auditorium = 1.5m2 to 2m2 per seat x $C/seat
Carpark = 30m2 to 40m2 per carpark x $D/carpark

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TYPES OF PRE-CONTRACT COST PLANNING
A. PRELIMINARY COST ESTIMATE
Example of CFA x $/CFA
PROPOSED RESIDENTIAL DEVELOPMENT
PRELIMINARY COST ESTIMATE (AS AT JULY 2004 PRICES)
Site Area = 130,000 m2
Element CFA Rate Total
(m2) ($/CFA) ($)
1. Site Formation * 130,000 650 84,500,000

2. Detached House 15,000 14,870 223,050,000

3. Duplex Houses 7,500 16,670 125,025,000

4. Apartment Blocks 30,000 12,380 371,400,000

5. Club House 2,500 12,530 31,325,000

6. Car Park 8,000 4,470 35,760,000

7. External Works ** 39,000 750 29,250,000

Total (as at July 2004 prices) 63,000 14,291 900,310,000

Note : * Estimated site formation area

** Estimated external work area

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TYPES OF PRE-CONTRACT COST PLANNING
B. ELEMENTAL COST ESTIMATE

Total Construction Costs = Sum of (Elemental Quantity

x
Elemental Unit Rate)
Standard Elements
Site preparation : demolition, site formation, site investigation
Foundation & substructure : piling, basement
Carcase : structural frame, door, window, curtain wall, shop front, skylight
Finishings : roof, floor, internal wall, ceiling, external wall
Fixture & fittings : metal work, built-in furniture, equipment
Services : sanitary fitting, plumbing, electrical, fire services, HVAC, security,
gas, communication, automation, swimming pool filtration plant, sewage,
refuse disposal
Miscellaneous work : external work, landscaping, drainage, utilities
connection
Preliminaries (% allowance)
Contingencies (% allowance)
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TYPES OF PRE-CONTRACT COST PLANNING
B. ELEMENTAL COST ESTIMATE
Elemental Quantity
Design information (e.g. Architects first sketch design)
Analysis of previous similar projects

Elemental Unit Rate

Location factors
Specification level
Construction methods
Cost analysis of previous similar projects
Adjustment of price index

Allowance for
Preliminaries
Contingencies

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TYPES OF PRE-CONTRACT COST PLANNING
B. ELEMENTAL COST ESTIMATE

Report of Elemental Cost Estimate

Cover
Contents
Summary of cost estimate (exclusions)
General particulars (project details, definition of area,
schedule of area, basis of cost estimate, drawing list)
Outline specification & assumptions
Supplementary information

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TYPES OF PRE-CONTRACT COST PLANNING
C. COST PLAN

Total Construction Costs = Sum of (Approximate Quantity

x
Unit Rate)
Standard Elements
Site preparation : demolition, site formation, site investigation
Foundation & substructure : piling, basement
Carcase : structural frame, door, window, curtain wall, shop front, skylight
Finishings : roof, floor, internal wall, ceiling, external wall
Fixture & fittings : metal work, built-in furniture, equipment
Services : sanitary fitting, plumbing, electrical, fire services, HVAC, security,
gas, communication, automation, swimming pool filtration plant, sewage,
refuse disposal
Miscellaneous work : external work, landscaping, drainage, utilities
connection
Preliminaries (% allowance)
Contingencies (% allowance)
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TYPES OF PRE-CONTRACT COST PLANNING
C. COST PLAN
Approximate Quantity
Design information (e.g. drawings & specifications)
By measurement

Unit Rate
Suppliers / Sub-contractors quotations
Recent returned tenders
Cost analysis of previous similar projects
Adjustment of price index

Allowance for
Preliminaries
Contingencies

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TYPES OF PRE-CONTRACT COST PLANNING
D. PRE-TENDER COST ESTIMATE

Based on B.Q.

Priced in current unit rates

Suppliers / Sub-contractors quotations
Recent returned tenders
Cost analysis of previous similar projects
Adjustment of price index

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TYPES OF PRE-CONTRACT COST PLANNING
E. RECONCILIATION OF COST PLAN

Reflecting change of design / specification

Cost differences between old & new designs / specification
Cost saving exercise
Factors caused cost differences
Change in Employers requirements
Change in development
Change in site conditions
Change in design
Change in specification
Change in price indices

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TYPES OF PRE-CONTRACT COST PLANNING
E. RECONCILIATION OF COST PLAN
Example
Item ($)
(1) Cost Plan No. 1 (as at February 2003 prices) L

(2) Adjustments
(a) Increase overall building height from A m to B m
(i) (+) structure [cost of structure A x (B - A)]
(ii) (+) architectural feature [cost of architectural feature A x (B - A)]
(iii) (+) window [cost of window A x (B - A)]
(iv) (+) E & M [cost of E & M A x (B - A)]
(v) (+) internal finishes [cost of internal finishes A x (B - A)]
(vi) (+) foundation & sub-structure [cost of fdn & substr x 15%(say)]

(b) Allowance for Preliminaries Costs [Total of (a) x 10%(say)]

________________
M

(3) Adjustment for Tender Price Index (TPI) N = (L + M) TPI(old) x [TPI(new) - TPI(old)]
________________
Cost Plan No. 2 (as at July 2004 prices) L+M+N

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 Factors affecting
Cost Estimate / Plan

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Factors affecting Cost Estimate /Plan
Cost Information
Source of cost data
Suppliers / Sub-contractors quotations
Use of previous cost data
Use of previous cost analysis
Application of tender price indices
Reasonable % allowances
Inclusions & exclusions

Market Information
Market conditions (e.g. inflation / deflation etc.)
Rapid change of material (e.g. huge increase of structural steel
price in 2003)
Change of labour costs (e.g. decreasing since 1997)

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Factors affecting Cost Estimate /Plan

Experience of Q.S. / Estimator

Senses of build-up rates
Senses of elemental unit rate
Reasonable assumptions
The more expensive elements, the more attention paid
Knowledge of construction methods
Knowledge of new technologies (e.g. pre-cast faade, steel formwork,
light weight concrete internal wall etc.)
Knowledge of building regulations
Senses of market trend
Senses of material costs (Lockhart / Portland Street)
Senses of construction related news (e.g. $27-$125 / ton)

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 Thank You
victorlau@hkis.org.hk

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